The European Union is negotiating a major expansion of its Carbon Border Adjustment Mechanism (CBAM), potentially extending carbon-related obligations beyond basic steel and aluminium to a wider range of manufactured goods. The proposed changes could alter the cost of supplying European industrial customers from production centres in China, Türkiye and other non-EU markets.
The European Commission’s proposal of 17 December 2025 would bring 180 downstream products with significant steel or aluminium content into CBAM from 1 January 2028. The Council agreed its negotiating position on 12 June 2026, refining the proposed product scope and strengthening anti-circumvention provisions. On 15 September 2026, the European Parliament adopted amendments by 464 votes to 50, with 159 abstentions, supporting broader coverage. Parliament’s position envisages an expanded list encompassing up to 457 product categories. These figures reflect the positions of the EU institutions during negotiations; the final list has not been enacted.
From primary metals to manufactured goods
The proposed expansion addresses a potential gap in the existing system. Current CBAM rules cover specified imports of steel and aluminium, but products manufactured outside the EU using those materials may enter the European market without an equivalent obligation applying to the finished goods. This creates a risk that manufacturing activity could shift abroad to avoid carbon-related costs rather than emissions being reduced.
According to the Commission, approximately 94% of the products included in its proposal serve industrial value chains. They include mountings, cylinders, industrial radiators and specialist machinery, while the remaining products include selected household goods.
If adopted, the changes would extend carbon-cost considerations further into manufacturing and procurement decisions. European importers could face obligations linked not only to the emissions associated with a finished product’s manufacture but also to the treatment of embedded precursor materials, depending on the final rules.
A component sourced from a third-country manufacturer, for example, may incorporate steel produced in a different country. Assessing potential CBAM exposure would therefore require importers to establish the applicable product classification, trace the relevant production chain and determine the emissions attributable to covered inputs under the rules ultimately adopted.
China and Türkiye face changing cost calculations
China and Türkiye are particularly exposed to the proposed changes because of their roles in fabricated metals, machinery components and supply chains serving European industry. Extending CBAM to downstream goods could change the delivered cost of products from these markets, although it would not automatically remove their existing price advantages.
The impact would depend on the final product scope, applicable origin rules and the proportion of covered materials contained in individual goods. Products that appear similar could receive different treatment if their classifications, material composition or production characteristics differ under the final legislation.
For manufacturers and importers, this makes product-level analysis essential. Broad assumptions based solely on a product’s appearance or country of origin may not establish whether a particular item would fall within the expanded mechanism or how its potential liability would be calculated.
Anti-circumvention and material traceability
The legislative proposals also address resource shuffling, potentially misleading emissions data and pre-consumer metal scrap. The proposed provisions could affect the acceptance of reported production figures and increase the importance of documenting material provenance.
These measures form part of the broader effort to ensure that the mechanism reflects the emissions associated with covered goods and materials. Their precise implications will depend on the provisions retained in the final legislation and the accounting requirements established for the expanded scope.
The downstream proposal should be distinguished from the separate EU steel quota measure that entered into application in July 2026. That measure restricts tariff-free steel import volumes and imposes a 50% out-of-quota duty. The quota regime and the proposed CBAM expansion address different aspects of import costs and should not be treated as interchangeable measures.
Importers prepare for several legislative outcomes
Companies importing manufactured metal products should begin assessing their exposure without assuming that the proposed product list is already law. A practical starting point is to build a product-level inventory covering current and proposed Combined Nomenclature (CN) classifications, identify suppliers and precursor materials, and model potential liabilities under several plausible legislative outcomes.
Procurement contracts may also need to preserve access to production-site data and clarify how the parties would allocate costs arising from regulatory changes. Such preparations could help importers respond once the final scope, implementation timetable and accounting requirements become clear.
The ongoing negotiations will determine which products are covered, when the new obligations begin and how embedded emissions are accounted for. The proposed expansion would nevertheless mark a significant shift in the reach of EU CBAM, extending the policy beyond primary commodities and further into the manufactured goods and industrial supply chains in which European businesses compete and generate margins.
